Blockchain networks are supportive of principles that allow permissionless usage and open access. The technology has worked to shy away from political influence and regulation that may undermine the idea of independence and democracy. However, the governance and accountability of decentralized finance networks have always been questioned. In addition, the answer has always been that the blockchain network users/participants control the blockchain.
Most critics argue that the critical decisions in the blockchain networks are influenced by the developers, miners, founders, and ‘whales.’ Thus, it counters the notion that the system is democratic. Assuming that major cryptocurrencies become major payment methods and subject to government regulation, will the technology still be considered a common good to the general public?
Such a move will mean that the critical decisions are made by a public administrator, developers, node operators, and consortium of economists, engineers, civil servants, and scientists. If this happens, will the foundational principles of these cryptocurrencies be changed? For example, will the issuance limit be retained or expanded?
A token for the public good
A ‘common good’ is defined by an asset’s obligation to the general public. Public goods are; thus services or commodities recognized and available to the public and are bound to government regulations. Blockchain networks meet these requirements without government intervention since they are publicly available, including participants, developers, and founders of rival networks. Moreover, the technologies have a way of resolving disputes, and the unhappy parties can always fork the network and create one in their own design and liking.
However, some economists disagree on the accuracy of cryptosystems. They dispute the allegations that transactions in a DeFi are standardized and automated so that the user only has to trust math rather than humans. The digression suggests that cryptosystems, just like humans, are fallible and corrupt in nature regardless of the game theory and coding put into work. In the end, developers, founders, and miners will always find a way to exploit their power to gain from the network.
The Economist also went ahead to challenge the governance of DeFi systems. The Economist shed some light on the fundamentals of accountability and governance that the decentralized finance systems promise since those behind these networks are suspected to be the swayers of critical decisions. The idea of blockchain governance is only meant to make the users feel like they are a part of something big, while it is the influential people that call the shots.
Future Projections on the Number of Users
Government intervention in cryptosystems has been anticipated since the emergence of Bitcoin. Maybe that is the reason its adoption had spiked in a decade. In addition, the coin is envisioned to amass billions of participants and become a reserve currency if governments get involved.
However, people still consider cryptocurrencies a “common bad” due to the negative environmental impact compared to the actual good they do. Moreover, if the proof-of-stake (POS) becomes effective and corporations and major institutions hugely accept the network, it would draw government attention. Conversely, state-controlled cryptocurrencies are proof that governments are already chipping in. This could churn a mass adoption, attracting billions of users by the next century.
Are Devs up to no good?
The notion that developers influence critical decisions made on blockchains may just be alarmism. The technology is articulate, and the developers come as easy scapegoats for crypto ‘haters’. Even though some networks are actually centralized, assuming that developers manage the networks is insane. Even so, the node operators in highly decentralized networks determine whether the network needs maintenance to their core protocols. In addition, the networks are made so that an increase in the number of users influences more responsibilities to the node operators. This way, the individuals are incentivized to operate a node while protecting their on-chain assets. The devs are the minds behind the engineering of such networks. They should thus be credited rather than discredited or accused of making decisions for the networks.
Government Regulation
Most crypto enthusiasts and users are confident that government interference is out of the question in the governance of blockchain networks. The decentralization is the fun in it. However, some think that governments will soon catch up to them for several reasons. For instance, any reasonable government would not allow cryptocurrencies and proof-of-work (POW) to exist due to the insane energy consumption. According to the majority of the opinion, the continued toleration of mincing translates to global unaccountability. Thus, governments are only bound to regulate the use of crypto instead of its protocols.
Contrary opinions speculate that Bitcoin might soon be centralized. The fact is backed by the mining pools that make users question the level of security and privacy due to the centralized mining architecture. The centralized architecture makes it easy to manipulate Bitcoin mining. Moreover, transacting Bitcoins occurs on centralized platforms.
For how long can Bitcoin maintain its decentralization? Will the other Blockchain networks’ self-righting algorithms hold for long? The inevitability of government governance is visible if the networks do not put more effort into ensuring they maintain independence and democracy in the networks. On the other hand, enthusiasts hold that the decentralized networks came into play due to the mistrust of traditional banking, which will make it hard to co-opt government intervention.
Bottom line
If a cryptocurrency has to be the next generation’s mode of payment and store of value, the stakeholders should explicitly define what contributes to its good governance. It serves to tell who has the power to control the blockchain. This should be done when the blockchain is still at the development stages or when the network still has low stakes to make changing the governance arrangements arduous. Moreover, abandoning the issuance limits of significant networks like Bitcoin and Ethereum could adversely affect the world economy due to their influence on the world market.
If people start seeing cryptocurrency as a store of value and mode of payment, it might soon become a global currency, becoming a major global infrastructure for the common good. With that, the issue of governance will continue arising. Thus, a super-government to oversee the networks will be anticipated to minimize the conflicts. Developing a governance system of widespread participation and accountable leadership is the only way of achieving idealism for generations to come.
